Futures Market Sentiment and Institutional Investor Behavior in the Spot Market: The Emerging Market in Taiwan

The present work has been designed to intensely investigate the capability of the commodity futures market in achieving the aim of price discovery. Further, the downside of the cash and futures market and transfer of the risk to other markets has also been studied using VaR, and Bivariate EGARCH. The findings of the work point that the metal commodity derivative market helps in the efficient discovery of price in the spot market except for nickel. But, in the case of the agricultural commodities, the spot is found to be leading and thus there is no price discovery except turmeric. On the other hand, the volatility spillover is bidirectional for both agri and metal commodities except copper, where volatility spills only from futures to spot. Further, the effect of negative shock informational bias differs from commodity to commodity, irrespective of metal or agriculture.

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Has COVID-19 Changed the Hedge Effectiveness of Bitcoin?

Frontiers in Public Health ◽

10.3389/fpubh.2021.704900 ◽

2021 ◽

Vol 9 ◽

Author(s):

Yinpeng Zhang ◽

Panpan Zhu ◽

Yingying Xu

Keyword(s):

Futures Markets ◽

Vector Autoregression ◽

Spot Market ◽

Futures Market ◽

Conditional Heteroskedasticity ◽

Volatility Spillover ◽

Empirical Results ◽

Dynamic Correlation ◽

Autoregressive Conditional Heteroskedasticity ◽

Gold Futures

The Bitcoin market has become a research hotspot after the outbreak of Covid-19. In this paper, we focus on the relationships between the Bitcoin spot and futures. Specifically, we adopt the vector autoregression-dynamic correlation coefficient-generalized autoregressive conditional heteroskedasticity (VAR-DCC-GARCH) model and vector autoregression-Baba, Engle, Kraft, and Kroner-generalized autoregressive conditional heteroskedasticity (VAR-BEKK-GARCH) models and calculate the hedging effectiveness (HE) value to investigate the dynamic correlation and volatility spillover and assess the risk reduction of the Bitcoin futures to spot. The empirical results show that the Bitcoin spot and futures markets are highly connected; second, there exists a bi-directional volatility spillover between the spot and futures market; third, the HE value is equal to 0.6446, which indicates that Bitcoin futures can indeed hedge the risks in the Bitcoin spot market. Furthermore, we update the data to the post-Covid-19 period to do the robustness checks. The results do not change our conclusion that Bitcoin futures can hedge the risks in the Bitcoin spot market, and besides, the post-Covid-19 results indicate that the hedging ability of Bitcoin futures increased. Finally, we test whether the gold futures can be used as a Bitcoin spot market hedge, and we further control other cryptocurrencies to illustrate the hedging ability of the Bitcoin futures to the Bitcoin spot. Overall, the empirical results in this paper will surely benefit the related investors in the Bitcoin market.

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HOW EFFECTIVE IS FUTURES AS AN INSTRUMENT OF HEDGING AGAINST PRICE RISK? -A STUDY BASED ON SPOT AND FUTURE PRICES OF GOLD

International Journal of Research -GRANTHAALAYAH ◽

10.29121/granthaalayah.v4.i9.2016.2548 ◽

2016 ◽

Vol 4 (9) ◽

pp. 143-150

Author(s):

Shafeeque Muhammad ◽

Thomachan

Keyword(s):

Spot Market ◽

Futures Market ◽

Price Risk ◽

Time Varying ◽

Risk Hedging ◽

Hedging Effectiveness ◽

Cash Market ◽

Hedge Ratios ◽

Opposite Position

This paper examines the role of commodity futures market as an instrument of hedging against price risk. Hedging is the practice of offsetting the price risk in a cash market by taking an opposite position in the futures market. By taking a position in the futures market, which is opposite to the position held in the spot market, the producer can offset the losses in the latter with the gains in the former. Both static and time varying hedge ratios have been calculated using VECM-MGARCH model. Variance of return from hedge portfolio has been found to be low. Further hedging effectiveness has been observed to be around 12%.

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